Proper Verification of Checks and Applying Holds

Banker Resource October 16, 2012 — 1,170 views

Proper Verification of Checks and Applying Holds

As a banker or teller, one of the things one must do is verify negotiable instruments. Fraudsters have access to many and better printing devices in the 21st Century and will try to pass fraudulent checks any time they can. There are many ways one can avoid this, protect the bank, and stop fraud.

First, examine the check for proper Magnetic Ink Character Recognition, or MICR. On true checks, the MICR strip of numbers is ever so slightly raised. All one has to do is run thumb and forefinger along the strip to feel the raised numbers. Second, feel the paper stock. Valid checks have a distinct "check-like" feel, whereas fraudulent checks feel slick, or even greasy. Cashier's checks also have signature lines composed of micro printing. Use a standard magnifying glass to ascertain signature line validity. Third, examine the check and the customer's identification to ensure the customer is the payee. Fourth, verify proper endorsement of the check. Fifth, if the item is a government or payroll check, examine it for anti-fraud markings. Most will have a watermark, bleeding ink, a hidden symbol, or a combination of all three. After verifying the check through examination, contact their maker if there is still doubt on the validity of a check. The maker will usually verify a check.

Regulation CC governs when funds are available after deposit. While cash and Direct Deposit are both instant, most checks are not. Genuine government, cashier's checks and certified checks are allowed same-day availability. Regulation CC provides that $100.00 of any "non-same day" check be available the first business day after deposit. The remainder of the check is then available the second business day. Sometimes, though, something just "does not feel right". If a check is doubtful, Regulation CC allows for a longer hold than the standard funds availability. The six instances where this is allowed are:

1) Large deposits over $5000.00

2) Redeposits of already returned checks, except where the check was returned for missing endorsement

3) Deposits into accounts that are repeatedly overdrawn

4) Accounts that are fewer than 30 days old

5) Checks deposited under emergency conditions, such as natural disasters, communications breakdowns, system outages, power failures, or other things that interfere with normal transaction of business

6) Reasonable grounds that the check is uncollectable

Holds may last up to seven days, and non-local checks may take up to 14 days to clear.